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Before: Ms. Suchitra Kamble & Shri Prashant Maharishi
ORDER Per Suchitra Kamble, J.M.: This appeal is filed by the Revenue against the order dated 28.02.2017 passed by the CIT(A), Ghaziabad for the assessment year 2013-14.
The grounds of appeal are as under :
The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.2,14,88,922/- ignoring the facts that it was compulsory on the part of the assessee to acquire new capital asset against the long term capital gain income as per section 11(1 A) of the Act, in order to be eligible for benefit to the section 11(1)(a) on long term capital gain.
2. The order of Ld. CIT(A) being erroneous in law on facts deserve to be quashed and that the order of AO to be restored.
3. The appellant craves to add or alter any or more ground or grounds of appeal as may be deemed at the time of hearing of appeal.
The return declaring nil income was e-filed on 28.09.2014. The case was selected for scrutiny. The assessee trust is running a dental college namely, Harisharan Das Dental College, at Ghaziabad. During the course of assessment proceedings, the Assessing Officer observed that the assessee sold three properties for a sum of Rs.2,45,85,000/- whereas the sale proceeds shown by the assessee was for a sum of Rs.1,96,73,000/-. During the course of assessment proceedings, the assessee explained to the Assessing Officer that difference in sale consideration being an amount of Rs.52,37,000/- was on account of sale proceeds of building and bus which have been taken into consideration in the schedule of fixed assets. So while computing the capital gain on the sale of capital asset, only a sum of Rs.1,96,73,000/- has been considered. The Assessing Officer observed that the assessee has not acquired any new capital asset within the provisions of section 11(1A). Accordingly, the Assessing Officer denied the benefit of section 11(1) on long-term capital gains computed at Rs.2,14,88,922/-.
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
The ld. DR submitted that the CIT(A) erred in deleting the addition of Rs.2,14,88,922/- ignoring the fact that it was compulsory on the part of the assessee to acquire new capital asset against long-term capital gain income as per section 11(1A) of the Act, in order to be eligible for benefit of section 11(1)(a) on long-term capital gains. The ld. DR further submitted that the Assessing Officer has rightly observed that the assessee has neither purchased any new asset nor exercised any option for purchase of new asset, therefore, the entire capital gain is taxable.
At the time of hearing, none appeared for the assessee despite giving notice. Therefore, we are proceedings on the basis of assessment order and the order of the CIT(A).
We have heard the ld. DR and perused the order of the CIT(A) and the assessment order. The CIT(A) held as under :
“5.2.2. Examination of facts reveal that appellant has received a sum of Rs. 2,58,12,415/- against which made total revenue expenditure of Rs. 2,98,46,516/-. The total receipts include the sale proceeds of land, which was part of capital asset of the appellant. The appellant has earned a capital gain of Rs. 1,65,76,922/- from the sale proceeds of Rs. 1,96,73,000/- and after considering the indexed cost of land at Rs. 30,96,078/-. The AO invoked the provision of section 11(1A) stating that appellant has not acquired any new capital asset and denied the benefits of provision of section 11(1)(a) claimed by appellant. Section 11(1)(a) is an independent section whereas section 11(1A) gives option to the appellant to the benefit of provisions of section 11(1A) or 11(1)(a) i.e. making investment in capital/revenue expenditure for benefit u/s 11. This has also been observed by Hon'ble Calcutta High Court in the case of CIT vs M/s East India Charitable Trust 206 ITR 152 the AO has not challenged the application of capital gain by the appellant for the charitable purposes within the meaning of provisions of section 11(1)(a) read with section 2(24) and the appellant is holding valid registration u/s 12AA. As per section 11, the trust has to be registered u/s 12AA and income derived from property held under trust, if it is utilized for charitable or religious purposes the same has to be exempt, provided that income is applied for such purpose to the extent of at least 85% of the total receipt during the year. In the present case it has not been disputed by the AO that the capital gain, being part of income, has been applied for charitable purposes. In view of above facts the claim of appellant is correct, making appellant eligible for the benefits of provisions of section 11(1)(a). The appellant has also contended that while computing the capital gain AO did not give the benefit of cost of building. Examination of facts reveals that AO has not given any adverse finding regarding exclusion of sale consideration on account of sale of building and sale of bus, as the appellant has included the same in income as part of sale of fixed assets. In view of above facts the action of the AO denying benefit of provisions of section 11(1)(a) is deleted and these grounds of appeal are allowed.”
8. From the perusal of the CIT(A)’s order, it can be seen that the CIT(A) has given detailed observation relating to eligible benefits of provisions of section 11(1)(a) and properly observed that the Assessing Officer never disputed that the capital gain being part of the income is applied for charitable purpose. On this basis, the Assessing Officer cannot deny the claim of the assessee which is correct under the provisions of the Income-tax Act, 1961, as the assessee is eligible legal person for the benefits of provisions of section 11(1)(a) of the Act. Therefore, Revenue’s appeal is dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on this 27th day of August, 2019.